Empirical evidence suggests that there is a long lag between the time a new technology is introduced and the time at which it is widely adopted. The conventional wisdom is that these observations are inconsistent with the predictions of the frictionless neoclassical model. In this paper we show this to be incorrect. Once the appropriate driving forces are taken into account, the neoclassical model can account for 'slow' adoption. We illustrate this by developing an industry model to study the equilibrium rate of diffusion of tractors in the U.S. between

We reevaluate the role of human capital in determining the wealth of nations. We use standard human capital theory to estimate stocks of human capital and allow the quality of human capital to vary across countries. Our model can explain differences in schooling and earnings profiles and, consequently, estimates of Mincerian rates of return across countries. We find that effective human capital per worker varies substantially across countries. Cross-country differences in Total Factor Productivity (TFP) are significantly smaller than found in previous studies. Our model implies that output per worker is highly responsive to changes in TFP and demographic variables.